The recent Eighth Circuit case of Halbach v. Great-West Life & Annuity Insurance Company involves another controversy over the issue of vesting in regards to medical benefits. The Eighth Circuit overturned the district court on two issues:
(1) Whether there was a valid plan amendment eliminating medical benefits for long-term disability recipients; and
(2) Whether the disability recipients were vested in their medical benefits prior to the plan amendment.
The lower court said there was no valid amendment and that the disability recipients were indeed vested. However, the Eighth Circuit reversed the district court and ruled there was a valid amendment, but held that whether or not the disability recipients were vested presented a genuine issue of material fact that needed to be resolved at trial.
While there appears to have been a plan document for the plan, the document which the plan sponsor claimed was the plan amendment terminating benefits and which gave rise to the controversy consisted of a letter to the disability recipients notifying them of the cessation of their benefits. The letter referenced an attached SPD-type document which summarized the changes that were being made. Because the plan document indicated that the plan could be amended by a “written instrument signed by an officer of the Company,” the Eighth Circuit felt that the letter to the disability recipients qualified as a plan amendment.
While the conclusion reached by the Eighth Circuit might have gotten the plan sponsor to the result they wanted in the case, sometimes a loose interpretation of what constitutes a plan amendment can go the other way. Remember the Fifth Circuit Halliburton case holding that a Merger Agreement acted as a plan amendment?